“I have just converted the calculations from your proposal, Glenn. By my calculations, it will cost us $200 to generate each lead to hand over to our BDMs to prosecute to conversion. That means our BDMs will need to convert each lead provided to an appointment at a%. Then to convert an appointment to a RFP at b%. Then to convert a RFP to a verbal agreement at c%. And then to convert a verbal agreement to a paying gig at d%. A typical gig for us generates $e. At f% margin. Therefore it will be clear, a month or two down the track, whether the $200 investment (as an additional cost to sale) for each lead generated will return or not. That’s a pretty steep sales team RoI, Glenn.”
At one level.
But… there is an essential flaw to this “true enough” case.
“Who generates the leads now?” “Well, our BDMs generate their own of course. Just not enough of them.” “What is the cost per lead under that sales team RoI scenario?”
Whatever dollar amount is calculated under this regime, that figure must be offset against the “additional” $200 figure from above derived from bringing in additional resource to execute that work. This is the piece that is often missed in attempting to calculate the RoI on specialist / add-on resource to conduct lead generation / lead qualification.
If the calculations in the latter scenario are properly and fully costed, they will often be more than $200 per lead generated.
A classic scenario of looking at a business case from a cost perspective vs a sales team RoI perspective.